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LIBRARY OF CON 




013 823 06 



VIEWS 



-OF AN- 



Eminent French Economist, 



-ON- 



The Commercial Crisis. 



Alleged Causes 



-AND- 



Remedies Proposed, 







TRANSLATED FROM THE FRENCH BY D. DROIN. 






W. M. BAYNE PRINTER, 10 S. WATER ST., CLEVELANC. 


.. 








V 


\Q 


86 







ff& 3 73/ 



LOWER PRICES 



-AND THE- 



UNIVERSAL COMMERCIAL CRISIS. 



Alleged Causes, and Proposed Remedies. 



For the last two years the whole world is suffering from an intense com- 
mercial crisis, which few countries escape. France, for particular reasons 
suffers the most ; but neither England, Belgium, Italy, Germany, nor even 
the United States and the South American republics are free from it. It is 
felt everywhere more or less according to the p >wer of resistance. There are 
signs of a universal depression of trade. All over Europe and in England rail- 
road profits are less. In France, during the last 5 years, trade has been constant- 
ly on the decline. The imports, which in 1880 amounted to 5,033,000,000 of 
francs, gradually went down in 1881 to 4,863,000,000 ; in 1882 to 4,821,000- 
000; in 1883 to 4,804,000,000; in 1884 to 4,343,000,000; and in 1885 to 
4,215,000,000. The decrease in the amount of exports began with us at a 
more recent date. The highest point was touched in 1882, viz. : 3,574,000- 
000. Since then it has been going from bad to worse ; it dropped in 1883 
to 3,451,000,000; in 1884 to 3,232,000,000; in 1885 to 3,185,000,000. 
During the last few years imports have therefore decreased by 818,000,000, 



— 3 — 
which is equal to 16 per cent., and our exports, which have suffered less than 
the imports, are 389,000,000 or 10J per cent. less. 

Of course the difference between the period of thrifty years and the 
present time is less, considerable, than it appears, because the lower prices 
have to be taken into consideration ; but it is this lowering of prices, which , 
owing to its generality and constancy, is most puzzling to those who have de- 
voted the most attention to the question. It is hardly necessary to mention 
the reduct d amount resulting from taxes, especially those imposed on riches, 
such as duty for registering, but also from the duties imposed on popular 
consumption, such as that on tobacco. Our politicians taken by surprise, as 
they were spending the public niooey as fast ps they could, are very much 
troubled at this sudden decrease in the income. This ill luck affects other 
countries as well. To mention two instances only : England, (whose present 
Government is weak, and who is troubled with political dissensions), also has 
large deficiencies, but far less, considerable, than ours. Her trade hag 
decreased as follows : 

The Imports in 

1884 amounted to £389,000,000 ; in 1885 they went down to £372,- 
000,000, that is £17,000,000 less. 

The Exports in 

1884 amounted to £296,000,000 ; in 1885 went down to £271,000,000 
that is £25,000,000 less. 

Of course the lower prices have much to do with this difference, so much 
more so, that the English Commercial Statistics follow the variation of prices 
much more minutely than we do ; nevertheless the decrease in real trade 
remains important. 

A country which (unlike France and England) has during the last few years 
been led by a prudent and wise administration, and whose finances are well 
conducted, Italy, suffers also, although less, from the general crisis. The 
imports of goods (precious metals excluded) from 1,317,000,000 francs in 
1884, rose to 1,457,000,000 in 1885. Thus contrary to what took place in 
Great Britian, imports have increased ; but as this was 'on account of the 
bad crops, this increase does not mean a better state of affairs. 

The Italian Exports from 1,065,000,000 francs in 1884 went down to 



— 4 — 

946,000,000 francs in 1885, and although the bad crops explain this partly, 
yet it must be acknowledged that the universal crisis has bad something to 
do with it. 

We should tire our readers uselessly if we mentioned figures of the trade 
of all the principal nations of the world. The statistics of Germany would 
also show that their trade has been affected by the universal depression. 

The new countries, who with the presumption of their youth and strength 
believed they were invulnerable and could not be affected by the ills of the 
old world are now obliged to confess that their prodigious development is 
meeting obstacles and is relenting. 

Imports of goods in the United States : 

From $723,000,000 in 1882-3, went down to $667,000,000 in 1883-4. 

The Exports have not met with better luck. From $804,000,000 in 
1882-3 they declined to $725,000,000 (metals excluded), inl883-4. 

In the year 1884-5 instead of improving things have been worse. The 
exports from the United States dropped to $688,000,000 in 1885, making a 
difference of no less than about $200,000,000 since 1880. 

In South America the Argentine Republic is suffering from great finan- 
cial and commercial embarrassments. One can therefore say with truth that 
the whole world is under the evil influence. 

What are the causes of this universal disturbance ? How long will it last ? 

What remedies should be applied to re-establish the balance and render 
healthy the Commercial Constitution of the nations ? 

With reference to the origin of the crisis, opinions are very*con dieting. 
Some only see in it one of those periodical catastrophies, which result from 
overgrowing, and always follow all great stiides, but disappear by them- 
selves. Amongst those who hold that opinion, some think the worst is now 
over, and that the patient is convalescing, they point out the signs they dis- 
cern, group them together, and comment upon them. 

One of these optimists, Mr. Clement Zuglar, who has made a special 
study of the crisis, perceives reassuring symptoms in the movement of the 
metallic reserve and portfolio of the banks. He thinks we have reached the 
worst and that the position is improving. A business man which iD this 
matter seems to be a disciple of Mr. Zuglar, Mr. Jacques Siegfried gives 



— 5 — 
particulars according to which better trade is not far off. However, the 
ideas and previsions of other thinkers, no less systematic, are very different, 
they maintain that the present crisis is, dissimilar to all others, the cause 
not being natural, but artificial, that the mistake of a few governments 
having created it, they can very easily and in a moment destroy the cause 
of it. Just a clause of an international treaty would transform the preser t 
state, which is universal, into one of sudden and general prosperity. 

These doctors, so affirmative, are the partisans of silver, the "bi-metal- 
listes" as they call themselves. They seem perfectly convinced and dispife 
all the ignorant and misinformed people who don't divide their opinion. 
They assume the character of apostles. They have plenty of talent and 
can talk well. It is sufficient to mention the names of Mr. Emile de Laveleye 
teye~in Belgium, the spiritual sarcastic and persuasive Mr. Cernuschi in 
France, and Mr. de Soubeyran in our Chambers to see that these doctors, 
whose remedy is unique and immediate, are far from being unimportant 
men. Silver they say has been put aside, gold introduced as the only mone- 
tary king : silver is having a terrible revenge, by throwing the whole world , 
into a crisis, out of which it will only come when silver resumes its posi- 
tion. Amongst those who have closely watched the present Commercial 
Crises, the ideas greatly differ. Some say it is the result of overproduction, 
man produces more than he requires ; if he does not stop producing so much 
wheat, clothing, houses, humanity will die of hunger, cold, and will have no 
place to live in. The doctrine although singularly contradictory is not new. 

Then come the protectionists who say the whole trouble is caused through 
not protecting yourselves sufficiently, all countries suffer because they buy too 
much, and don't sell enough. One must be more protected. When the 
different countries have acted upon this mysterious ideal of selling much to 
one another without buying from each other, when they shall have destroy- 
ed through customs duties all the productive forces of other lands, good 
times will come again and last without interruption. 

Let us examine these different opinions. It is only of the influence 
of the monetary question upon the prices of goods and upon trade 
that we shall speak. Formerly there were two metals, silver 
and gold, sometimes rivals, at other times united, and whose aim 



— 6 — 
was the monetary organization of the world, which was 
sometimes divided between them. Each had its own territories. Gold 
reigned supreme in England and the United States and in Scandinavia. 
Silver had no rival in India or Germany, and reigned nominally in Austria 
and Russia. At last both metals after being enemies, became closely united 
friends and possessed together France, Italy, Switzerland, Belgium and 
Greece, or what was called the Latin Union. All had the same legp.1 rights ; 
one could always apply for payments to the one or the other, on the condi- 
tion of giving 15J grammes of coined silver against 1 gramme of gold, or 
vice versa. That is what Mr. Cernuschi in his flowery language calls 
"pair bi-mettallique." That par only existed in some countries, not in all, as 
we have just seen. After the war of 1870-71 Germany, proud of her suc- 
cess, and trusting in the power our 5,000,000,000 francs would give her, 
wished to change her monetary system. From the poor country that she was 
or seemed to be, she had the pretention of becomiag a rich nation and acted 
accordingly. A rich nation with a cosmopolitan trade and ease in all classes 
must use gold (the "above all" precious substance), for her usual payments. 
Germany, then, faithful to the economical principles which Bismark has 
been trying for the last six years to make her give up, rejected silver and 
adopted gold as unique standard, refusing even to discuss the 
doctrine of double standard. This had been done previously by 
Scandinavia ; others had also been asked to do so. France, for instance, in 
1867, when Mr. Michael Chevalier, M. de Parieu and a number of enlight- 
ened bankers were pressing the Imperial G overnment to adopt the unique 
gold standard. The obstinacy of the directors of the Bank of France alone 
upset the project, and they are now very much grieved and worried at the 
enormous quantity of silver in her vaults. Germany was said to have with- 
drawn silver from circulation. But in fact she holds a large quantity of it 
yet ; as an American writer remarks, in a late publication , she still holds 
more than $100,000,000 of silver coin and these circulate more than in the 
United States. Germany, according to Mr. Cernuschi himself only withdrew 
from circulation 4,000,000 Kilogrammes of silver, which, according to our 
legal tariff are worth only 810,000,000 francs, and of these 4,000,000 Kilog. 
of silver which have ceased to be German, about 2,000,000 have been con- 



verted in 5 franc pieces for the Latin Union. Therefore only about 
2,000,000 Kilogrammes of silver went out of Europe to Asia, viz : 405,000,- 
000 francs according to our legal tariff, and this is but an insignificant 
quantity. Mr. Cernuschi is therefore justified in saying, in a letter addressed 
to the Times, that the monetary stock of Europe is, on the whole, about as 
important as it Avas in 1881. Although the withdrawal from the circulation 
of German thalers is far from being so important as is generally supposed, 
the initiative of Germany, coincided with a radical change in the monetary 
situation of the world. The value of silver declined, that is, it possessed no 
more the value which the Latin Union monetary laws attributed to it com- 
paratively to gold, the proportion of 1 gramme of gold to 15^ of silver, 
which is a sort of conventional law, from which one cannot deviate, without 
great danger, was violated. 

• Already since February, 1867, or 4 years before the monetary conver- 
sion in Germany, the value of silver had been nearly always on the Londcn 
market below that of our tariff. Instead of being to gold in proportion of 
15.50 to 1, it was nearly always 15.60 or 15.65 to 1. But since 1872 the 
difference became greater. In 1872 it was 15.64 to 1, in 1873 15.93 to 1, in 
1874 16.16 to 1 ; silver declined therefore successively 2, 3 and 4 per cent. 
The countries included in the Latin Union which constituted by themselves 
the region of gold and silver, and exercised a kind of condominium, and 
according to a tariff made in the beginning of the century, having equal 
monetary power, must have been deeply impressed by such a considerable 
change, which seemed compelled to increase in proportion to the value of 
the two metals. They were afraid that our monetary tariff being in cont a- 
diction with facts and too conspicuously unfavorable to gold, France, Bel- 
gium, Switzerland, would adopt more and more silver coin, this metal ob- 
taining an increase of value when converted into Ecus (five franc pieces) 
and that most of oi«r gold pieces would be withdrawn from circulation, as 
the value of silver as per our legal tariff, for this metal had dropped too 
much. Seeing the difficulty of practically keeping up the double standard, 
and the necessity of having in fact unique standard of silver if she didn't 
prefer to establish some way or other indirectly the unique standard of gold, 
the Latin Union, although with hesitation, took the latter course. France 



resisted as much as she could, but Switzerland first, then Belgium insisted, 
and the Latin Union consequently suspended the eirQwlntiw* of silver en- 
tirely. coinin S 

The depreciation of this metal continued ; and increased every day. In- 
stead of the classical proportion (which with us is legal) of 15£ grammes of 
silver, as equivalent to 1 gramme of gold, they quoted successively on the 
London exchange as follows : 



IN 




IN 




1875 


16.63. 


1876 


17.80. 


1877 


17.19. 


1878 


17.96. 


1879 


18.39. 


1880 


18.05. 


1881 


18.24. 


1882 


18.27. 


1884 


18.65. 


1885 


18.63. 



that is to say that a silver ingot of 18 grammes, 63 was equal in value to. a 
gold ingot of 1 gramme. Silver lost nearly 21 per cent, of the value which 
our laws attributed to it, and which it had " grossomodo" with frequent but 
small fluctuations, preserved until 1871. Therefore, what Mr. Cerunschi 
called the " pair bi-metallique" was completely out of existence, and then 
began what the writer described as the monetary "morbus." To-day things 
are worse, the depreciation of silver is over 22 per cent. 

Whilst mentioning the different turns of fortune of the metals, we have 
wished to avoid any discussion of principle, with respect to the use of the 
two precious metals as coin. It is sufficient for us to gather and put together 
facts, in order to find out what influence they may have exercised over 
prices. The first which had been seriously troubled is that of silver. What 
has been the cause of the considerable depreciation which it has undergone ? 
Here we shall not detain you long. Mr. de Laveleye, Cernuschi and 
de Soubeyran affirm that the only causes of the lowering of silver to such an 
enormous extent, was on the one hand the withdrawal from circulation of the 
German thalers, and on the other, because the Latin Union gave up coining. 
We have seen above, that Mr. Cernuschi acknowledges himself that the with- 
drawal of the German thalers has been much less than is generally believed. 
In opposition to this explanation of the depreciation of silver, one can allege 
facts which are precise, and constant. That is, that the production of the 



— 9 — 
silver mines has not ceased to grow, at an enormous rate since 15 years, and 
that the expenses for extracting this metal, owing either to the discovery of 
more important mines or to the progress of the industry, are much less, 
whereas the production of gold instead of increasing has slightly decreased. 
A few figures on the subject may prove interesting : 

The mines of silver of the whole world only produced during the period 
of 1851-55 an annual average of 886,115 kilogrammes, the outturn grad- 
ually increased until 1870; since then it has become immense. In the 
period of 1871-75 the yearly production went up to 1,969,000 kilog, or just 
double what it was 20 years previously. In the following 15 
years it developed again considerably, and the average per annum rose to 
2,450,000 kilog ; the figures of late years even surpass this : 

IN. 

1881 2,592,000. 

1882 2,769,000. 

1883 2,895,000. 
1885 2,860,000. 

The annual outturn has therefore more than trebled in 25 years. This in- 
crease maintains itself notwithstanding a depreciation of 22 per cent, in the 
price. Nothing shows that mines are likely to become less powerful. At the 
same time gold is following a different course, instead of increasing it de- 
creases, not however in considerable proportions, but yet in a noticeable 
manner. In the period of 1851-55 the average production used to be 197,- 
515 Kilog., even 206,000 in 1856-60 which represented more than 7,000,000 
francs of gold produced every year. The outturn falls gradually to 172,000 
kilog. in the period of 1876-80, and then growing less it went down to 158,- 
000 in 1881, to 146,000 in 1882, 143,540 in 1883, and 140,000 in 1884 ; 
therefore, in 30 years it has decreased about 30 per cent. 

Eig hty years ago our monetary laws had assigned to these two metals a 
certain proportional value, the proportion was maintained until 1870, not 
however without variations, but they were slight. Then it happens that the 
production of silver is three times more than it used to be, whereas that of 
gold is a third less ; is it therefore to be wondered at, that on the ingot mar- 
ket the value of the first should have dropped comparatively to the secmd '? 



— 10 — 

Is it necessary to look out for any mysterious explanations ? Is not the 
principal reason the change in the importance of the production? Formerly, 
that is in the period of 1851-55, 688,000,000 francs of gold were produced 
every year, against 199,000,000 francs silver. 

The value of gold produced represented 77J per cent, of the whole pro- 
duction of precious metals and the value of silver only 22J per cent. In 
1884 the proportions are almost reversed, the gold produced is annually 
487,000,000 of fraucs, and that of silver 642,000,000; gold is now produced 
in less quantity viz.: 43 per cent., and silver 57 per cent. Such modifica- 
tions cannot take place without a change in value. 

Leaving aside the question about the real or principal cause of the de- 
preciation of silver, the essential point to study, is the commercial crisis, 
examining whether the scarcity of gold has been able to exercise a sensible 
influence on prices, and on the whole commerce of the world. This alleged 
scarcity of gold is but relative, seeing that the yearly production still 
amounts to about 500,000,000 francs. 

The numerous writers, English or French, who wish to see in the 
rarity of gold, the cause of the crisis, point out the simultaneity of 
the events. The price of all merchandises went down, they say, greatly, 
and are going down rapidly every day, and the beginning of the lower 
prices coincides as near as possible, according to them, with the with- 
drawal from the circulation of the German thalers and the stoppage 
of the coining in the countries belonging to the Latin Union. It is 
observed besides, that the production of gold diminishes at the time that a 
greater number of nations adopt that metal as basis of their monetary circu- 
lation. 

Besides Germany the United States have taken up again paying in specie 
on the basis of the gold standard, although they are still coining, to be agreea- 
ble to the silver producers in fixed proportions, dollars which nobody will have. 
Italy, also, who has given up the "cours force" has taken of the rest of the 
world a large amount of gold, which she tries to keep carefully in the vaults 
of her banks. The extent of trade increases constantly in the whole world. 
Gold only follows now in an unequal manner, this increase in the commer- 
cial operations. That is the reason that, wheieas 25 years ago a great num- 



— li- 
ber of people talked about the depreciation, to-day certain English theorists 
have created a new word " appreciai ion" of gold by which they mean the 
increase in value of this metal. 

The same persons who see in thecrisis a monetary cause, add that the 
loss of 20 to 22 per cent, of the silver value since a few years constitutes for 
the countries who have this metal for standard an enormous advantage, that 
they can sell their produces, say wheat at 22 per cent, less, and that the 
European agriculturist is at the mercy of the Hindoo cultivator. 

In all those arguments are mixed facts, which have been more or less 
observed, and the deductions are but conjectures. The present crisis, same 
as all others, is characterised by lowering of prices of almost every thing. 

The crisis is nothing else but an interruption or a diminution of circula- 
tion, of consumption, and a more advanced stage of the disease of production. 

It is difficult to exchange. Lower prices and even the nominal quota- 
tion of price usually accompany all crisis. 

When Mr. de Soubeyran lately in the Chamber of Deputies mentioned the 
change in prices from 1873 to 1885 he had much in favor of his argument. 

Nobody can deny that most goods have gone down greatly in value. The 
Financier of course exaggerated in some cases, as he was not very particular 
about the dates in his comparisons. When for instance he said that wheat 
in 1873 was worth 41.50 francs per 100 lbs., Iron 30 francs, Cast Iron 113 
francs, and that to-day they are only worth 21.25, 12 and 43 francs, which 
represents a depreciation of 49 per cent, on wheat, 60 per cent, on iron, and 
62 per cent, on cast iron , Mr. de Soubeyran omitted to say that 1873 was an ex- 
ceptional year for bad crops, and that the metal industry, under the impulse 
of a great movement of speculation, underwent a rise the like of which had 
not been seen in this century. To give the prices of 1873 and 1874 as nor- 
mal was greatly altering facts. All these exaggerations were useless, to 
explain the lowering of the prices of nearly every article, natural or manu- 
factured. It is but too certain, and although the average is not 50 per cent., 
yet sometimes it is one-fourth and one-third. 

Although the less value is true, when we look at the prices of wheat, 
wool, cotton, iron, silks, colza and linseed oil, coffee, copper, lead, it is far 
from universal. Many articles have escaped or been only slightly affected. 



— 12 — 

By consulting special books on prices of goods, a good many articles are seen 
not to have varied in a notable manner since 25 or 30 years, viz : Tin lost 
nothing or very little. In 1861-70 it was 107s in London, in 1871-80 it 
was 100s, and in 1881-84 95s. This is far from the pretended average of 
50 per cent, on all articles, and yet tin comes mostly from Asia, Sonds Islands 
and Malacca, who have the silver standard, and who, according to some 
theorists seen their shipments favored by the lowering of that metal. Besides 
tin, many other colonials are in the same position. 

SALT, which is used everywhere, was worth during 1881-84; 12s in 
London against lis in 1854-60, and 10s in 1861-70. This shows instead 
of a fall a decided lise. 

SOAP hardly went down 12 per cenl. from 1854 to 1884, in London, 
which is most directly influenced by the conditions of universal produce. It 
is the same with a very impoitant article, viz : 

BOTTLES, which sold at 117s per cwt, in 1881-84 against 120s in 
1861-70, and 130s from 1854 to 1860. 

COALS, although affected by the situation of metallurgy and steam nav- 
igation, English coals are just on the average what they used to be (llOd 
per ton in 1881-84) in 1854-60 ; true to say in the interval they had risen 
in a notable manner. 

If now we come to Colonials, with the exception of wheat, coffee and 
sugar, no trace is found of the famous average of 54 per cent., so much 
talked about. Let us leave aside Wine, the rise of which is explained by 
the philoxera ; but Beer is attaked by no insects ; well, during the last 30 
years it went up considerably, and instead of 69s per English barrel, which 
was its average value, during the period of 1854-60, it went up to 80s in the 
period of 1881-84. Butter has no insect to fear either, and is besides often 
adulterated through the addition of foreign substances, nevertheless the price 
in the period of 1881-84 is on the average 103s per cwt., against 84s in 
1854-60, and in 1861-70 it is about equal to the average price, 104s. The 
same thing applies to cheese and eggs. By looking attentively at the list of 
prices one would discover many other articles which have not gone down 
since 25 years. 

MEAT begins to decrease in value (in a very slight proportion it is true) 



— 13 — 
but only since two years, and the average price of beef on the London mar- 
ket is, in the period of 1881-4 much superior to the previous periods ; it was 
£84 against £79 per ton in 1871-80, and £56 from 1841 to 1850. 

SKINS also were dearer in the last five years (64s per cwt.) than in 
1861-70— 59s. 

There are even some natural articles which have notably advanced, for 
instance, Pepper, which sells 56s per cwt. in 1881-4 against 48s in the pre- 
vious 10 years, and 37s in the period 1861-70. 

The reader will excuse us from having entered into all these details, but 
in such matters it is necessary to be precise, and one can only do so by giving 
figures. This shows how far we are from a lowering of J or ^ in the prices 
since 15 or 20 years. There is a tendency to lower prices, but there are nu- 
merous exceptions, and sometimes very important ones. It is even more so 
the case, if, instead of considering the price of things, one looks at human 
services. Since 15 or 20 years it has been a constant rise everywhere. 
Whether liberal professions, or those formerly reputed servile, salaries and 
wages have gone up, and if since 2 or 3 years they remain stationary, there 
is no serious decrease. 

We should like those people, who pretend all prices are half what they 
were, to try and reduce by 50 or 25 per cent, the wages of their servants, or 
the fees of their doctors, lawyers, or painters, etc. The discussion of the 
Budget in all countries, protests against this pretended lowering of prices, 
for it is never question but to raise the salaries of petty employees, post office 
men, schoolmasters, etc. Therefore, as the price of human services con- 
tributes as much as the price of things to constitute the general price of 
living, it will be seen how superficial is the remark that everything has gone 
down one-half or one-third. 

It is evident that if the cause of the present depression was the increase 
of the value of gold, all prices without exception would have felt the in- 
fluence. The value of human services, should have suffered as well, and 
declined in an important manner, whereas this is not the case. 

Some other cause, or rather other causes, must be found for the weaken- 
ing of prices of goods, and it is not difficult to all observers, who have nj 
party spirit to arrive at a precise solution. It is sufficient to observe that, in 



— 14 — 

all articles that have gone down, two circumstances are noticeable. That 
the production is much more abundant, and that the expenses are far less 
than they used to be. Wheat, Cotton, Coffee, Iron, Cast-iron, Copper, all 
articles which have decreased in value offer these conditions. This has been 
told so often, that it seems almost useless to repeat it. Nevertheless as there 
are still men who attribute to the lower prices, one single cause, an imagin- 
ary one, such as the increase in the value of gold, it is necessary to state the 
real causes for each principal colonial produce. It is a fact that all statisti- 
cians have demonstrated, that the quantity of wheat put at the disposal of 
the civilized nations, has increased tremendously since 20 years. Accord- 
ing to Mulhall, Europe possessed in 1850, about 360,000,000 acres of cul- 
tivated land. In 1870, 440,000,000 (or 180,000,000 hectares) and in 1884, 
up to 482,000,000 acre< (or 198,000,000 hectares). Taking into considera- 
tion) our small portion of the globe, the cultivated surface (area) has in- 
creased 34 per cent, about, in less than 35 years. If it is added that the 
improvements in the manner of cultivating have been numerous, and that 
the outturn has increased everywhere, it will be seen how much greater 
agricultural production has been during the last 25 years in Europe, than 
the increase of population, and this is only a slight cause of the lower prices. 
The over production of new countries which has been added to the develop- 
ment of production in the old world, makes the difference much more out of 
proportion between the production of colonials and that of the population. 
One estimated at 55,000,000 acres the area cultivated in the United States 
in 185.0, at 88,000,000 acres in 1870, and at 157,000,000 in 1884. There- 
fore, in 34 years the extent cultivated has all but trebled, and almost doubled 
in the last 14 years. 

The British Colonies, besides India, have not been far behind America, 
their cultivated area was 12,000,000 acres in 1850, 18,000,000 acres in 1870 
and 25,000,000 acres in 1884. Contrary to all the provisions of Matthews 
and Ricardo, during the last quarter of a century produce (for subsistence) 
in all the civilized countries of the world has increased much more rapidly 
than the population. Another man reputed for the accuracy of his state- 
ments, Mr. de Neumann Spallart, says the business of Cereals of the civil- 
ized world has more than doubled from 1869 to 1879. Altogether the im- 



— 15 — 
portation of Cereals of flour of the nations belonging to our group of civili- 
zation, was only 1,636,000,000 of marks (2,045,000,000 of francs, $409,- 
000,000) in 1869-70 ; it rose to 3,268,000,000 (or 4,085,000,000 francs, 
$817,000,000) in 1879. Since then it has receded slightly, 

This increase not only applies to grain, but it is the same for a good 
many articles, the prices of which have gone down. 

The total production of Cofton which was estimated at 1,192,000,000 
pounds weight in 1840, and 2,398,000,000 in 1860, remains about stationary 
during the period that followed (10 years), in 1870 it was only 2,474,000,000 
thaD is merely an increase of 3-| per cent, in 10 years. This was on account 
of the Civil War aad the suppression of silver, (withdrawal from the circu- 
lation) but this was only temporary, and after 8 or 10 years a change took 
place. The plantations in the South were soon reconstituted with free 
workmanship. The American Union which only produced 1,540,000,000 
pounds cotton in 1870, had in 1880 a crop of 3,161,000,000 pounds, and 
in the whole world the production was 4,039,000,000 pounds or 67 per 
cent, inrease in the short space of time (10 years). This increase, however, 
is unimportant compared with that of Wool. Cotton must be planted, but 
it is sufficient to open new ground for cattle for them to multiply and 
with them their wool. 

A Commercial Circular from an Antwerp broker, establishes in a strik- 
ing manner the relation of prices with the quantities of wool imported in 
Europe. If one considers only the production from the three principal pro- 
ducing countries, Australia, the Cape, and the Plata, in 1864 Imports were 
only 458,000 bales, in 1868 they are nearly double 879,000 bales, the prices 
then go down to 1.35 francs and fall even for a time to 0.85 francs in 1869 
the lowest price ever known. 

During 5 or 6 years Imports remain about stationary or develope but 
slowly and prices become firmer. But in 1877 the Imports are considerable 
1,272,000 bales or 40 per cent, more than 5 years before ; the prices go down 
in about the same proportion. During the following 2 or 3 years the Im- 
ports remain stationary and prices go down. The production increased, Im- 
ports of wools in Europe are estimated at 1,740,000 bales in 1885 when prices 
go down notably. In 1886 colonial wools amounted to 1,888,000 or double 



— 16 — 
the Imports of 1872, and four times that of 1864. 

As this business man says with much common sense, and he is not ac- 
quainted with the subtleties of bi-metallists, it is doubtless that the produc- 
tion is the great regulator of prices, for wools as well as for grain, coffee and 
other articles. Wools have not been wanted in proportion to the strong and 
regular increase in production, and prices therefore dropped. When the 
real cause is so evident, why have recourse to mysterious causes 
to explain the lower prices. The only thing necessary is to open 
ones eyes. The increase of production has fallen off considerably, although 
less for coffee, in 1885 only 321,000 tons were imported from countries in 
connection with Europe; whereas, in 1865, 422,000; in 1875 505,000; in 1881, 
588,000. In this case the increase from 1865 to 1881 is less, being hardly 
40 per cent, in 16 years, but consumption is less, which is the case for all 
articles of luxury or half luxury. The production of sugar owing to the 
premiums offered by the government to makers, has grown more than that 
of coffee, Mr. de Neumann Spallart estimates at 16,750,000 metrical Centals 
the production of cane sugar in the civilized world in 1867 . Up to 1877 
production is very slow, then it is 18,800,000 Centals, but in 1881-82 it is 
more than 25,000,000 metrical centals or an increase of one-third in 5 years. 
Beetroot Sugar is not behind and from 15,066,000 in 1879-80 it went up to 
21,709,000 in 1882-83, or an increase of 40 per cent, in 3 years. 

Since then it seems that the production of sugar has been further de- 
veloped. Is it astonishing that consumption should follow at an unequal 
pace an offer which grows at such a rate ? A simple examination will con- 
vince any impartial person that the cause of lower price, for metals, as well 
as other articles, is the production. Fine Copper has been most depreciated 
during the last 15 years, but then in 1850 they only produced 45,250 tons 
of it, whilst in 1860 the outturn amounted to 67,370, and in 1870 to 82,120 
and by a prodigious bound it jumped in 1880 up to 120,000 tons, and to 
even more in the years that followed. The same thing can be said of Lead. 
In 1830 the production was only 104,000 tons ; in 1850. 170,500 tons ; 
whilst in 1880 it reaches 379,000 that is more than double in 30 years. 

Iron has not been behind either, quite the reverse, in 1850 the produc- 
tion amounted to 4,280,000 tons, it went up gradually to 10,550,000 in 1870, 



— 17 — 
then 14,230,000 in 1871-80 as average of 10 years, and at Last 19,820,000 
in 1882. It nearly doubled in 12 years. 

The increase in the production of coals has been nearly as rapid in the 
whole civilized world. Against 62,900,000 tons in 1850, it rose to 141,- 
000,000 in 1860, and 344,000,000 in 1880, which represents an increase of 
about 145 per cent, in 20 years. We might name many other instances. If 
now instead of the special and precise causes of the lowering of the price of 
each article we examine the general causes, they are easy to find. The silver 
question has nothing to do with it. The general causes can be said to be the 
following. The whole world is better explored than it was 20 years ago, so 
that all natural riches, better lands and better mines are known. Capitals 
are more abundant, because there has been more saving and because of the 
better condition in all classes, people move easier, undertake more, and 
are more willing to displace their capitals than they were 25 years ago, so 
that the simple news of the discovery of some natural produce, never mind 
where, immediately brings forth attempts to derive profit out of it. Under 
this respect the development of anonymous societies has an importance the 
extent of which people only just begin to realize. Small individual capital 
has been substituted by the collective force of many, and sometimes increased 
ten times. If Capitals have had more tendency to emigrate to colonies 
incurring risks of all sorts, men themselves have become less sedentary and 
they follow with ardour, capitals, wherever these call them, if they find it 
profitable. The progress of industry which manifests itself in hundred ways 
by inventions, discoveries, or even simply by improvements, or slight modi- 
fications which workmen call "tours de main," have contributed and con- 
tribute every day to the constant development of production and to the low- 
ering of prices. The last reason which is not the least, is the improvement 
in transports especially by sea since 15 years. 

It has been reckoned that thanks to the new vessels and to better know 1- 
edge of commercial routes, to the cutting of the Isthmus and opening of 
new parts, to the telegraph by which orders can be sent so quickly, (so that 
less time is lost at ports of loading, waiting for orders), every English sailor 
carries now twice the quantity of goods than he did in 1870, three times 
more than in 1860, and four t mes more than in 1850. 



— 18 — 

These are the undeniable causes which have acted and continue to act 
on the supply of the world. To look elsewhere for an explanation, is to 
close ones eyes willingly. It is useless to observe that silver metal has lost 
or is actually losing 22 per cent, of its value, or rather of the value which 
our monetary tariff attributes to it, and that gives to the Indians an advan- 
tage for their exportations. Amid so many phenomenas, so great, and so 
accentuated, this is but a trifle, quite insignificant. Most colonials which 
have dropped in price, are not produced in the countries where the silver 
standard has been adopted. 

The great copper markets for instance, are not in the east, but in the 
west, viz.: Spain and especially the United States of Ameiica. It is the same 
with iron and wool, which comes more especially from English Colonies, who 
have a gold standard. Australia and the Cape, also the Argentine Republic 
which before the "cours force" used gold. Even sugar and cotton are mostly 
produced in countries where the lowering of silver metal has no direct in- 
fluence. 

Besides it is necessary to study the real effects of depreciated money on the 
external trade of a large country. Some people pretend that the lowering 
of silver metal in India, constitutes for her an enormous advantage, because 
it allows her to sell her goods at a price Which calculated in gold, is below 
that of her competitors, on the other hand almost all the financiers of India 
and England talk of the embarrassments, caused by the depreciation of sil- 
ver to the Indian treasury. India has considerable remittances to send to 
England, and part of her debt for public worksand railroad, is payable in 
gold. She is so much the less in the possibility of buying, and therefore, 
so much the poorer on account of the loss of value of her money. 

If one admits the principle, that depreciation of money constitutes an ad- 
vantage in the country affected by it, Russia ought never to be more pros- 
jjerous than when her rouble goes down. The Argentine Republic and 
Bivzils, than when their paper loses a new fraction of its nominal value. 
One ought to deduce also that all countries which 5, 10 or 15 years ago, 
(such as Italy and the United States) had their paper money, wanted to re- 
sume paying in specie would have acted wrong, because substituting a strong 
money to a weak and more variable one, they would have rendered their 



— 19 — 
exports more difficult. That at first the weakening, slow and gradual of the 
monetary values of a nation may help in a certain measure to develope ex- 
ports is admissible, but this is a transitory phenomena, all prices soon take 
their level, salaries and emoluments rise, the temporary advantage which 
the producers and shippers derived from the depreciation of money disap- 
pears. 

If the foreign trade of India has notably increased during the last 15 
years, if the exportations of wheat rose from 1,755,000 cwt. in 1873-74, to 
6,340,000 in 1877-78; to 19,863,000 in 1881-82, and to 14,151,000 in 1882- 
83 ; and that of rice from 19,805,000 cwt. to 31,031,000, one can show for 
this better reasons than the depreciation of silver. The causes are the fol- 
lowing : The considerable development of Indian railroads, the Suez Canal, 
and the constant reduction of its tariff, also the reduction of freights. 

Railroads &nd steamers are the great levellers of prices, nothing can 
compare with them. In 1870 English India only possessed 4,775 English 
miles of railroads, which was very insignificant in such an enormous Empire. 
It gradually increased in 1883 to 10,144, and now it is about three times 
what it was in 1870. One seems to forget that in India as in most new 
countries, railroads are of recent introduction. The Suez Canal has not either 
been in existence a very long time, only having been opened to navigation 
in 1869, and it took a good many years to build a fleet of steamers able to 
make use of it. 

Then the tariffs of this canal have been very much lowered. In 1873-74 
the duty was still 13 francs per ton, and was increased by the pilotage duty, 
etc., which made a total of 14 francs. 

Since the beginning of 1885, the pilotage duty has been abolished and 
the passage duty reduced. Vessels only pay now 9.50 francs to go through. 
Freights have been also considerably reduced. I see in the "Bulletin du 
Canal de Suez," that the rate of freight during the 5 years following the 
opening of the canal, frequently amounted to £3^ or £4 per ton (82 to 100 
francs) from Calcutta to Europe, and £1.10 or £2 (37.50 to 50 francs) from 
Bombay to Europe, where as in the beginning of tois year they had drop- 
ped to £1.10, £1.12 from Calcutta, and 15s or 16s from Bombay. This is a 
reduction of at least half. Add to this all the improvements introduced to 



— 20 — 
facilitate the loading and unloading of ships, such as elevators for grain 
and all the other new facilities in the ports. One will find in these circum- 
stances a cause for the depression in the value of goods, far less problemati- 
cal than the depreciation of silver. With reference to precious metals, when 
people talk of the diminution of gold production having brought about the 
lower prices, there is another consideration which should not be omitted It 
is not true that it is necessary for the maintenance of prices that the quan- 
tity of precious metal which forms the standard, be legal, be in use, increase 
in proportion to the extension, and if we can say so, the amount of business 
done. Many recent discoveries allow economy in the circulation of the pre- 
cious metals. Cablegrams for instance are now used all over the world, the 
canals at present in existence, the improvements in steam engines, all these 
have reduced the use of precious metals in the international trade. In order 
to carry 1,000,000 francs in ingots from America to England, it only takes 
six or seven days instead of fifteen or twenty which were required 20 years 
ago. Gold ingots will be brought from Australia to England in thirty -five 
days instead of ninety days 25 years ago. Gold is, therefore, less time on 
the way, which is equivalent to an increase in the real quantity disponible. 
And then payments by compensation from one market to the other, have 
become more varied and abundant. The mere development of international 
personal property, permits to transfer capitals from one country to another 
without touching a gramme of gold. Bank bills have reached all classes of 
the population to a larger extent, and cheques are used everywhere for pay- 
ments. Being accummulated in the great banking establishments, precious 
metals undergo less loss either through carriage (transports) or material losses 
or by being treasured up in an occult manner. The whole world, therefore, 
uses far less metal either at home or in their international connections. Those 
who pretend that the crisis has been caused by the monetary conditions, 
ignore these facts which are undoubtable, and which party spirit alone can 
hide from intelligent men. It is, therefore, a very superficial and unreason- 
able opinion to attribute low prices of goods to other causes, but to the cul- 
tivation of new lands and easier intercourse, the easier transmission of 
capitals produced in old countries and becoming much more productive in 
the new, the improvement of communications by sea and by land: the con- 



— 21 — 
stant weakening of maritime and railroad freights since 25 years, and also the 
mechanical, chemical and technical improvements which have taken place in 
manufacturing. To all these prominent causes of depreciation, must be added 
one which is accidental and temporary, viz. : the weakening caused by the 
prolongation of the crisis which has lasted so many years. Speculation is 
discouraged, it is paralyzed. Speculation is quite as necessary to trade as 
Archilles was to the Greek Army, it gives the impulse, keeps up prices and 
brings hope. Without speculation everything languishes. Trade will only 
revive seriously when speculation comes out full of confidence in the future. 



PART II. 



It was necessary to show that the crisis from which the whole world suf- 
fers has no monetary origin, since important men have made the 
question so incomprehensible with their long arguments on the depreciation 
of silver that it was necessary to prove by facts how wrong is their supposi- 
tion. But then, the reader will say, from what precedes, the cause 
of the crisis is over production. Too much of everything has been pro- 
duced, and humanity is poor, because it is too rich. A great many men are 
not able to eat, to dress, and to find houses, because too much food, too 
many clothes, and too many houses have been produced. Over production, 
that is the great evil. It strikes everybody that this explanation is rather 
strange. When presented in a clear manner as we have just presented it in 
a few lines it seems rather paradoxical. Is it really the case that too much 
has been produced ? Can too much be produced ? And at all events is it 
possible that over production can bring misery to the population ? The sup- 
position of an excess of production, particularly when referring to subsist- 
ence can hardly be admitted. Humanity has so many wants, natural or 
artificial, that it never will be satisfied and one will always be able to work 
for it. Wants increase every day. When man is warmly clad and can put 
no more on his person, he thinks of putting carpets in his house or tapestry 
against his walls. Consumption is limited. It can be said with reason that 
if it is so in general, it may be that there is excess in production. Somebody 
who wanted to prove that one could produce too much of the same thing, 
took the example of coffins. Even if their price did lower consumption 
v ould not be greater. It is perhaps the only thing of which one can talk in 
such an absolute manner, and in this case one might say that if the produc- 
tion of coffins became easier and less costly, some people would buy them of 



— 23 — 
superior quality, so that even for tbis article which is ouly used once by 
everybody, it is impossible to say that the investing is limited in an 
absolute way, for if it is for quantity, it is not for quality. Another 
example, cradles and beds, of course the quantity cannot be extended indefi- 
nitely. Every year are born in France say 1,000,000 children, it is evident 
that if 3,000,000 cradles are produced, under pretext of improvement, 
although prices were lower, they would not sell, at least not in France. Few 
people want two or three cradles for one child. Therefore there are certain 
things the consumption of which is limited, at least in quantity, f r as to 
-quality it may improve. What we say of cradles applies to bee's also. Some 
other articles are in the same case, as clogs and shoes ; you could reduce 
price as much as you like, if all the population be provided, you will not be 
able to sell them easily. Few people want to imitate King August of Poland, 
who collected them. It is true that many people, however rich, think that 
old shoes, not too much damaged, have their merit, as well as old wood, old 
wine and old friends. But it is not everybody in the world who wears boots 
and stockings, and for this reason there is more room for production than 
one thinks. When the price of these articles goes down people change more 
frequently, and it has been noticed that since ordinary articles most in usj 
are cheaper, one does not repair so much. 

If for certain articles of personal use the production can be considered as 
limited to a certain quantity, everything over that limit is too much for the 
consumption, it is the same thing with some articles which are not destined 
to the immediate wants of the people, but are used as instruments in doing 
their work. Suppose for a moment that improvements for the makiug of 
needles or pins, suddenly allows to produce five or six times as many of them, 
it is evident that the quantity made will not find an exit. Nobody buys 
needles just for pleasure ; they are used for sewiug, and as it does not follow 
that one will increase one's sewing work because needles are cheaper, too 
many needles would be produced. Of course if the price was conciderably 
reduced one would not be so careful about them and the consumption might 
perhaps double, but it would be absurd to suppose that the consumption 
would be five times greater than it is now, just because the price is lower, it 
may be said that for all instruments used in this time of advanced civilization. 



— 24 — 

consumption is limited, to a certain extent at least. Too many weaving, or 
spinning machines, too many engines or wagons, too many steamers can be 
produced ; it seems to us that for the last, the excess of production is far too 
great. 

In 1877 the steamers built in Great Britian represented a tonnage of 
221,000 tons; in 1878, 287,000 tons; then in 1879, 297,000; in 1880, 
364,000 ; in 1881, 408,000 tons. This great activity in ship building con- 
tinued in the two years that followed, that is 1882 and 1883. Then, the 
aggregate tonnage being far too great, the building slackens. 

In 1870 the aggregate tonnage of the steamers of the whole 
world represented 1,918,000 tons, and in 1883 it went up to 7,- 
330,000 tons. The effective power of carrying has increased also 
much more than the tonnage. The engines are now so perfect 
that they have more power, although they consume less combusti- 
ble, so that a vessel having less coals to take can carry more go^ds and goes 
quicker, better arrangements have also been made in the ports, which make 
loading and unloading much more rapid, and so there is less loss of time. 
A few examples will show this progress. They represent the quickest passages 
from Europe to America. 

Formerly it was considered marvelous that the Great Western took only 
nineteen days and two hours from Bristol to New York. Three years later 
the Britannia, from Liverpool to New York, took only fourteen days and 
one hour. In 1875 the City of Berlin did it in seven days eighteen hours, 
and in 1882 the Alaska in six days twenty-two hours. 

With respect to long passages the "tea runner" called "Sterling Castle," 
in 1882 went in twenty-nine days twenty-two hours, from Hankow to Lon- 
don, fast steamers are now very numerous, consequently the carrying capa- 
city goes on increasing. Ten or 12 years ago it was computed that a steamer 
had a carrying capacity three times that of a sailing ship of equal tonnage, 
now-a-days it is computed at five times the capacity. It has been reckoned 
that in 1883 the steamers of the whole world representing an aggregate ton- 
nage of 7,330,000 tons, carried 10,945,000 tens of goods. If this is the case 
for steamers, the same excess can be said to have been committed for rails, 
metallic bridges and for the generality of metallurgic producers. It is the 



— 25 — 
opening of new roads, the cultivation of new lands, the bad crops of the old 
world, the constant progress in the art of navigation which have caused the 
exaggeration of ship building. On the other hand governments have helped 
by their premiums to merchants, and more so also by public works on too 
large a scale, thus imparting an artificial activity to the constructing of ma- 
chinery, which could not last. To-day, in order to get up again, they are 
trusting to the torpedo boats, to the men of war and on the substitution of 
wooden sleepers on railroads by metallic ones. We have examined which 
produces could be exaggerated, but it is not so for all categories of goods, 
those offered to men for direct consumption cannot be offered in too great 
quantity. It is not the same thing with stuffs, sugars, coffee, meat or even 
houses as it is with locomotives or steamers which are simply instruments of 
work. Humanity has not enough of the first, but does not know what to do 
with the second. ' Amongst wealthy people, to say nothing of those in 
trouble, a good many would use more carpets, curtains, sweets, would take 
more meat, more coffee, more wheat if not under the shape of bread as flour 
for stiffening of all sorts, or to feed chickens, etc., many would live in better 
houses but for two obstacles. Prices and habit. Of all these things it can- 
not be said that there is exactly excess of production, if the offer is more 
than the consumption, it is not that consumption could not absorb them, but 
because it is prevented doing so by circumstances which may only be moirsen - 
tary. Let us take houses in Paris, for instance ; it is usual to say far too 
many have been built. Financially, that is with reference to the 
interest of the builder, this is true, but not with respect to the 
wants of the people. Everybody in Paris complains of not having 
sufficient room ; those who occupy . two rooms want three, and 
those who have three want four or five. If they don't move it is 
a question of expense and of habit. Let prices weaken and the new 
habits be contracted, and it will be found that there are not too many houses 
for the Paris people. The same can be said of stuffs, sugar, coffee, and 
everything of personal consumption ; production is not exaggerated, but the 
price is too high, and it takes time to get into new habits. A man of fifty 
or sixty who never had any other carpet in his bedroom except a rug, and 
only a small carpet in his drawing room, cannot make up his mind suddenly, 



— 26 — 
even if prices are low, to furnish his house in a more comfortable manner. 
Periods of low prices are bound to come now and then in a very progressive 
society. They are useful in this way, that they cause a thorough investigation 
to be made, and a great effort to produce Avith more economy, also create new 
habits. When talking of excess of production it is necessary to distinguish 
these two classes of produces, which are very different. The first consists in 
things of which man does not make personal use, such as machinery, rails 
and sundry instruments ; it even includes articles destined to personal con- 
sumption, but the use of which is strictly limited. For instance coffins, cra- 
dles and beds cannot be used in greater quantity than that required. 

It is not the same Avith the second class of produce, Avhich is by far the 
most general, and Avhich is destined to satisfy the varied Avants of men. In 
this case the offer cannot exceed in an absolute and definite manner the 
wants and Avishes of mankind. The difficulty in selling can only be momen- 
tary and arises not from OA^er production, but because produced at too high 
a price, or because some of the articles produced answer to a natural want of 
men, but for the use of which, new habits have to be acquired, and this 
always takes time. It is often said of children that they have grown too 
much, this expression is not exact and ought to be completed, for nobody 
wishes them to become smaller, if that were possible. It is only meant that 
they have grown too fast and that effort Avas momentarily too great for the 
constitution, therefore, it Aveakened the subject who must be treated care- 
fully to become strong again. NoAA r it is exactly the same thing Avith over- 
production. It need not be supposed that men must produce less ; but the 
production having been too rapid and the new habits not having been ac- 
quired yet, it is only a matter of time and will come gradually. 

This growing fever is just the same thing Avith the social organism as 
with the human organism. Nature and time are the only remedies, and a 
good diet is required also. 



PART III. 



One must beware of empirics and quacks who are constantly telling men 
in power what they ought to do. The first of these doctors are the protec- 
tionists. They say too much is produced in the whole world, that we cannot 
compete against universal competition. The remedy is at hand, it is the 
proscription of foreign goods and the encouragement of national producers. 
This way of thinking is gaining ground. We don't know of any more un- 
reasonable, the longer I live, the more I observe, the more I compare, the 
more does the utter absurdity of protection reveal itself to me by undeniable 
facts. Protectionism is greatly answerable for thefpresent crisis. It cannot 
be denied that there exists concomitance between this state of things and the 
enforcement of protectionism in Europe and in America since 1878. Some 
will say it is by mere chance that the renunciation of commercial liberty 
should have been followed by a great crisis. Very well, let us not insist 
upon the simultaneity of the two phenomenas. But judge for yourselves of 
some of the effects of protection by a few examples. Amidst things the 
production of which have most increased and which are most depreciated 
are steamers, rails, and metallurgic produce, also a much used colonial pro- 
duce, sugar. Well these are in most countries of the world protected 
heavily. Too many steamers have been built and freights are so low that 
they are not remunerative. Is it to be wondered at? England went in for 
ship building with the energy she had acquired, and her usual liveliness 
and predominance. But here are other countries offering premiums to 
builders and merchants. France spends in this way 12,000,000 a year, 
Italy is beginning to do the same. Spain has differential duties to protect 
her ships. Governments who don't offer direct premiums give them indi- 
rectly under the name of postal subventions. Every day new ones are ere- 



— 28 — 
ated. How is it possible to stop ship building, when all over the world so 
many fictitious encouragements are offered, therefore of course there are more 
steamers than goods to carry. The disproportion must be so much more the 
greater, that everywhere protectionism reduces as much as possible the quan- 
tity of freight. It endeavors by protectional duties to stop mostly or entirely 
the importation of all foreign goods, wheat, maize, cattle, iron, etc. If you 
want to have a navy, if you subvention it, it ought really to have something 
to carry, and it can only carry goods coming from, or going to, foreign 
countries. 

The protectionist policy of France, and many other countries, is summed 
up in this admirable maxim ; " To have the largest navy possible, thanks to 
subventions, and premiums with as small a quantity of goods to carry as pos- 
sible, thanks to prohibition and protectional duties." The deplorable effects 
of protection are none the less in the metallurgical industry in general. 
Everywhere it is protected by extraordinary duties. In France they repre- 
sent 50 to 60 per cent, of the value of the goods, and yet it is one of the 
industries that suffers most, for the reason that everywhere duties have been 
exaggerated. In the United States, in Russia, Austria, Italy and Spain, 
also with us, people have been told that they shall never start sufficient blast 
furnaces and manufactories. This has brought about curious results. Accord- 
ing to some special paper, locomotives made in Spain have been sold on the 
English market. That is a fine success ; true or not, the fact is typical. The 
Spanish treasury which is as poor as possible would find means of subven- 
tioning her industry so that it could, thanks to gold paid by tax-payers, com- 
pete with the countries most advanced in manufacturing, and on their own 
markets. Italy, which was in the habit of ordering her locomotives first 
from England and France, then in Germany, manufactures them herself, 
although she has no combustible. All nations are exerting themselves to 
develop their exports, some to obtain the direct premiums, others, such as 
Germany, for the indirect ones which the Government offers by putting 
-railroad tariffs below cost price. 

Formerly export trade was comparatively the most profitable : now it 
"pays the least. One is satisfied with obtaining the equivalent of the manu- 
facturing expenses, the only consolation being that the general expenses have 



— 29 — 
been somewhat reduced. The metallurgical industry is everywhere in the 
greatest embarrassments, brought on by protectionism, causing so many 
blast furnaces to be erected everywhere with the aid of the tax-payers. 
Another cause, it is true, has added to its troubles. We shall talk about it 
later on. I refer to the immense orders of Governments. 

The absurdity of protection is shown better in sugar than in anything ^/ 
else. Everyone knows how complicated the laws on sugar are : new ones are 
made every year. They want to get a fiscal income out of this article, but 
at the same time they want the sugar industry to be the first in the world. 
France works it, so does Germany, Austria, Italy, Belgium, Holland, and 
further away Russia. Through some ingenious system each of these coun- 
tries offers premiums to exporters of national sugars. The result is that this 
sugar trade, owing to these exaggerated favors, has gone completely out of 
its natural ways. 

Everywhere production is exaggerated, the cost price is no consideration, 
the only thing aimed at is the export premium. A French sugar refiner told 
me sugar would be made in sufficient quantity to sweeten the sea. So much 
has been produced on account of Government premiums that prices have 
gone clown and continue to drop every day. The Governments increase their 
their favors, which will increase the deprepreciation of the 
article. Although the influence is less palpable in most cases yet 
the protection policy is nevertheless unfavorable to industry in gen- 
eral. If the sale of most of our produces destined for export has been cur- 
tailed, one of the reasons is that France has converted most nations to pro- 
tectionism. The example we gave has been followed by others. We refuse 
foreign wheat, cattle, and cotton goods, and foreigners refuse our Paris arti- 
cles, our silks, our furniture and our wine. The principal cause of this dis- 
proportion between the production and consumption of certain articles, is the 
custom house duties. It has a double effect. It stops exports and encour- 
ages new manufactories whose produces are also certain not to find an outlet. 
Furthermore trade treaties exist, so to say no more, as they don't include a 
fixity of duty. The result is, first, a great difference between the tariffs of 
the different countries, and secondly, a great instability between international 
connections. 



— 30 — 

The recent affairs in Roumania and Roumelia are a good illustration of 
what I have said. No one knows, a few months beforehand, the exact duties 
which will have to be paid to introduce certain goods into certain 
countries. Besides this uncertainty, the constant changes in inter- 
national politics is also a threat to the regular course of trade. 

Another cause of tne crisis is the exaggeration in the undertaking of 
public works by government, the whole of the European Continent and 
some remote countries such as the Argentine Republic, Australia 
have undertaken great works of pretended public usefulness. The 
idea that great works cannot be indefinite, that their efficacity is limited, 
that after a certain time they are in the way of the previous ones, and give 
no more help, no drawing stimulant to the industry of a country, such 
simple idea does not enter the frivolous minds of those who are at the head 
of parliamentary nations and especially democratic people. When a large 
country boasts six good ports it derives from them an advantage, but if it 
should have 1,000 of them what would be the result. It is as if a man in- 
stead of having 1 , 2 or 3 doors to go into his house, had nothing but doors 
on the whole of the ground floor. The same can be said of roads and canals. 
If there are too many, they are only depriving the agriculturists of useful 
land. The intelligent proprietor of an estate of 50 or 100 hectares, will not 
multiply roads indefinitely and would not say that the more he had of them 
the richer he would be. On the contrary he will consider it an expense to 
keep them up, and therefore, have as few as possible. This also applies to 
railroads. In a country of 500,000 square kilometres, the first 20,000 kilo- 
metres of rails are the most useful, the 5,000 following are less so, the third 
5,000 kilometres are almost superfluous. It is a kind of luxury which can 
be indulged in by using ones income, but which it would be unreasonable to 
undertake with ones capital. After this the railroads built would only carry 
a few passengers, but does not cause the country to produce one hectolitre 
more wheat or wine than it did before. Every new kilometre of railroad 
opened in France brings in 5,000 or 6,000 francs, people forget that 
this is not new traffic, but four-fifths of it is taken from parallel linea. 
All these useless public works add to the expenses and cause instability of 
industry. They have contributed in taking away from the agricultural dis- 



— 31 — 
tricts thousands of workmen, causing a rise of wages, and at the same time 
making them more exacting and undisciplined. It has given a fictitious ac- 
tivity or development to metallurgical industry, disturbed budgets, caused 
deficiencies, necessitated new taxes, increased public debts, or compelled 
them to suspend paying their usual amounts. Many thoughtless people are 
still urging the government to help workmen by starting new public works. 
If all these people who advise would only think, they would see that any 
intervention from the state is one of the causes of instability, disorder, and 
squandering, custom house laws which are constantly being changed, 
modifications which threaten the metallurgical industry, sometimes, landed 
property, the liberty of making new contracts, inconsiderate public works, 
new loans, new cities, etc., etc. All these have contributed to the present 
depression, and now contribute to prolong it. The first step to be taken in 
order to put an end to the actual state of things, would be to make protec- 
tion less severe and do away with all state socialism. Production would then 
find a more natural outlet all over the world, without being stopped by mov- 
able fences, goods would answer better the wants of the consumers. Before 
this equilibrium between production and consumption can come back every- 
where, it is indispensable that the cost price should be reduced and also that 
new habits should be adopted by the consumers. As it has been explained 
that most articles (there are but few exceptions) cannot be more numerous 
than the varied wants of mankind, the expression "over-production'' simply 
comes to this, that things have been produced at too high a price to suit 
consumers, or that one has produced too rapidly, before men have contracted 
certain new habits, which require time. Therefore, cost price must be brought 
lower, and it can be done this way. If the French Government had had a little 
more foresight during the last 7 or 8 years, and it could easily during such ; 
a period of peace (the longest known in France) it would have reduced taxes 
by 200,000,000 or- 300,000,000 fcs. For instance it would have been easy to 
reduce of 1 per cent, duty on transactions in landed property, to do away 
with the tax on goods per express trains, to abolish registering and stamp 
duty. With a little economy municipalities might also have given up a 
good many "centimes additionnels" on patents and customs duties, on mate- 
rials and combustibles. In tbis manner the state would have contributed to 



— 32 — 
reduce cost price of the production of the country. If instead of useless ex- 
penses for public works, the government had arranged with railroad com- 
panies (which would have caused less sacrifice) to diminish of 1 or 1^ cents 
the carrying per ton, and per kilometre of all "French goods for consumption 
in large towns or for export, or if it had encouraged companies to start an 
accelerated service at moderate rate which would have been between "grande 
and petite vitesse" (fast and slow trains), the government would have con- 
tributed efficaciously in lowering cost prices of French goods. This would 
have been far more intelligent than to build canals which nobody uses, 
second and third rate ports which nobody visits, railroads the traffic of 
\shich is is so small, and mostly taken from other lines previously existing. 

Furthermore if the government reduced their staff, instead of constantly 
increasing it with useless people, it would contribute greatly to alleviate in- 
dustry. Another thing which might help in diminishing the cost price 
would be to lower the rate of interest of profits on capital. Interest on capi- 
tals and profits on industry must be lowered. 

It is what we are coming to. 

In our "essay on the repartition of riches and tendency to less inequality 
between classes" we minutely described the causes and effects of this great 
social phenomena. Let governments reduce their extraordinary expenses, 
stop spending thousands of millions uselessly, let them leave something at 
the disposal of industry and agriculture, and you will see the rate of interest 
go down. People will be satisfied with 3 per cent, certain, and manufac- 
turers and merchants will be satisfied with h\ or 6 per cent. 

The government has also of late years caused great uneasiness with its 
incessant loans. It prevented the lowering of interest, which would in a 
certain measure lower the cost price of production. Of course, it will take 
time before new habits are contracted and before the higher classes can get 
accustomed to a phenomena which depresses the situation and mars their 
prospects. In the said essay we think we have proved that men are coming 
quicker than they think to less inequality in human conditions. 

Manufacturers and merchants will have to be satisfied with less profit, it 
will be more difficult to hoard up large fortunes, they will have to live 
cheaper, and the same applies to agriculturists. People attribute to foreign 



— 33 — 

competition the responsibility for the present state of affairs. The principle 
cause is elsewhere, you must look for it in the ways of living adopted of late 
years by many who had been prosperous and suddenly successful, also the 
scarcity of rural laborers and their habits of misconduct and laziness. 

To bring back durable lower cost prices something else is necessary, and 
that is better workmanship. It is useless denying the fact that workmen in 
.the western countries, clever under many respects, have got accustomed to 
new ways of living. A sudden increase of pay, a superficial education, also 
political and civil rights given them, which neither their fathers nor them- 
selves did possess. The emigration to large towns and on the other hand the 
scarcity of workmen in the country, are circumstances which as it was to be 
foreseen, have contributed to mislead workmen and more especially those 
who lead them. The result is that they have been running after higher 
salaries or have become lazy and have partially given up daily work. In 
1883 salaries in Paris were, stone masons 1.20 francs per hour, stone layers 
90 centimes per hour, brick-layers 85 centimes, wood-floor makers 9 francs a 
day, etc. It would be fortunate indeed if such remunerations could be paid 
to ordinary workmanship, but it is not the case. On the average nine-tenths 
of the men, even those who work are far from these rates. Workmen in the 
west, particularly those of the United States, England and France, forget 
that they have constituted, through special circumstances, a kind of aristoc- 
raciey in the world of work and as other aristocracies they 
have given way to exultation in some cases they have lost the 
taste for work, in others the conscientious manner in which they used to do 
it. Then leaders or chiefs have tried to make them give up sentiment and 
habits which make a good and solid workman. In this, western civilization 
runs a great risk. When China is opened, when its population of 350,000,- 
000 or 400,000,000 souls, have railroads, steam factories and capitals, salaries 
will have to be levelled everywhere, same as the price of goods had to come 
down to its level. Exceptional renumeration, two or three days a week 
without doing any work, will be impossible with the competition of the (ex- 
treme east) China labor. It is better to be prepared for this before it is too 
late. Capitalists must also submit to less profit, workmen (those at least 
who had forgotten themselves) must resume their former regular habits of 



— 34 — 
conscientiousness, in some cases emoluments will have to be modified, a 
compensation will be found in regular work and in the lowering in general 
of price, of things necessary to subsistence. In order that consumption be 
on the level of production it is not sufficient that cost price be less, because 
government taxes are less, interest and profits less, but a new commercial 
organization is requisite in most countries, in France especially, too many 
useless men are employed in government offices, the position is very abnorr 
mal. Prices of produces go down for the producer but not for the consumer 
in the same proportion; this comes from the numerous mediums between 
the wholesale cost price and the retailer's sale price, and these mediums, 
brokers, etc., don't even make sufficient themselves now-a-days. 

It is sufficient to say that in Paris, in 1854, there was one baker to 1800 
inhabitants ; to-day there is one in 1300. The development of education 
and well being which have made so many people despise manual work, is 
the principal cause of this absurd organization. It is about the same in all 
trades. The consequences are two fold. A great many people are wanted 
in the country and workshops, and cause an increase of general expense for 
production in general. Secondly, the consumer does not gain by the lower 
prices, therefore he does not buy more. The equilibrium between a larger 
production and a stationary consumption cannot be established, and under 
this respect Governments have nothing to do, but producers on the one hand, 
and the consumers on the other, are working mischief which they could pre- 
vent. They ought to agree to open stores to sell goods at retail at a very 
small profit on wholesale cost price. Failing this it would at all events be 
well if companies, or capable men, should undertake to organize small trad- 
ing on a different basis. There is a whole reorganization to be made before 
the buyer can feel the advantage of lower cost price, so that the producer be 
encouraged by the increase of consumption. The enormous stores against 
which so much has been said have given the example, for dry goods and 
furniture, and in this case the public derive an advantage ; the same must 
be done for colonial produces, and even rents must be lowered. On these 
conditions the balance will be re-established between production and con- 
sumption. When prices are lowered the consumer will adapt himself to new 
habits, will buy more and the crisis will be ended. 



— 35 — 

Not one of the proposed reforms is impossible to undertake, if people are 

Cth its exaggerated ordinances^ left free to do it, but most are obstructed 
the intervention of the Stated its disloyal competition to private enter- 
prise, or too heavy taxes. 

We have tried to explain the origin of the present crisis. It is more gen- 
eral than any previous one, because arising from sudden change in produc- 
tion, and especially from increased circulation in the whole world. And for 
this reason it will last longer. Nevertheless if Governments were wise, it is 
likely that in one year or eighteen months a notable improvement would be 
seen everywhere. We are aware that many of our readers expect more froni 
empiric remedies than from a healthy and normal diet. We receive letters 
urging us to ask the Government to buy up factories or mines and open them 
to workmen, to reform legislation, so that workmen be interested in profits, 
to borrow more and more for building purposes, etc. We admire the credu- 
lity of these good people, who, without having thought about work, capital, 
saving, enterprises, give such foolish ad vice, which, if followed, would make 
things considerably worse. The interference of Government in all this 
question is very detrimental and can never be a regulating one. We only 
request the government not to mix up in everything and irritate people, to 
diminish expenses and contribute by economy to reduce cost price, bring 
back confidence. You ask too little, will you say? No, because with its 
imaginative disposition it may not be willing to concede even as much. 



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